Personal and Business Income Tax Cuts Still in Play: House House Set To Strip Kasich Tax Plan From Budget

Personal and Business Income Tax Cuts Still in PlayHouse Republicans as expected will delete nearly all of Gov. John Kasich‘s ambitious tax overhaul from the biennial budget when the chamber unveils its first rewrite of the $72.3 billion spending plan.

The majority caucus will roll out its substitute version of the bill (HB 64) during a House Finance & Appropriations Committee hearing Tuesday. The committee will hold further hearings on the new measure Wednesday-Friday with plans to put the final touches on the bill and send it to the Senate the following week.

The House GOP’s plans to gut most of the governor’s tax package should come as no surprise to Capitol Square observers, as many in the caucus have been vocal about their opposition. Most of the testimony and comments fielded thus far have also been negative, including a resounding thumbs-down from the state’s key business groups, including the Ohio Chamber of Commerce.

And last month several caucus members expressed support for scrapping most of the proposal, which would have cut personal income taxes by about $5.7 billion while raising sales and other taxes to cover some $5.2 billion of that revenue loss.

Mr. Kasich has pushed the wide-ranging tax code rewrite as the next step in shifting Ohio’s tax base away from income and toward a consumption-based system to better reflect the state’s increasingly service-based economy. However, already-leery lawmakers have been witness to a parade of naysayers who questioned whether higher sales taxes and other aspects of the plan would truly propel the state’s economy as envisioned by the governor.

As big fans of tax cuts, majority Republicans are still pushing for a sizeable reduction based on projections for continued strong revenues and the retention of a few aspects of the governor’s package. Sources say the chamber is targeting a $1 billion overall cut.

Expected to survive the legislative surgery next week is a reduced version of the tobacco tax increase, people with knowledge of the discussions said. Mr. Kasich’s plan to “means test” some tax breaks, which would provide an estimated $318 million in revenue over the biennium for tax cuts, is also expected to remain in the bill.

One big selling point for conservatives is the permanent enactment of the formerly temporary 75% personal income tax cut for small businesses, sources said.

Gone will be the shake-up of the sales tax, including the proposed broadening to several services and the half-cent increase. The governor’s oil and gas severance tax increase, versions of which had previously been rejected twice by his fellow Republicans, is also out as is the Commercial Activity Tax hike.

The tax changes along with several other amendments have been signaled by policymakers as the House has worked its way through extensive deliberations over the last several weeks.